US GAS: Futures Rise On Chance LNG Diverted To Japan
By Ryan Dezember
HOUSTON (Dow Jones)--Natural gas futures rose Monday on the prospect of liquefied natural gas deliveries being diverted to earthquake-struck Japan from the U.S.
Natural gas for April delivery traded up 11.2 cents, or 2.88%, at $4.001 a million British thermal units on the New York Mercantile Exchange. The benchmark contract hasn't traded above $4/MMBtu since March 1.
"The prolonged risk of nuclear outages could divert spot LNG cargoes to Japan and incrementally tighten LNG supply," analysts with Barclays Capital said. "Any support for U.S. prices, however, should be short-lived as the U.S. market is not a competitive bidder for spot cargoes and LNG receipts have little room to go lower."
Liquefied natural gas imports accounted for 1.8% of U.S. consumption last year, according to the Energy Information Administration. Also, many contracts for LNG are long-term, potentially limiting the number of shippers who can divert deliveries toward higher prices.
Still, Barclays Capital estimates the U.S. could lose out on as much as 600 million cubic feet of delivered gas a day as Japan seeks to replace shut-in nuclear capacity.
Analysts with Simmons & Co. said two similar nuclear shutdowns in the last decade caused double-digit jumps in liquefied natural gas demand. If all of Japan's nuclear power is replaced with natural gas-generated power, demand there will rise 1.7 billion cubic feet a day, analysts said.
U.S. gas futures have fallen steadily since the end of January as traders expected heating demand to dwindle and producers to rapidly refill stockpiles that were drawn down by a colder-than-usual winter. An oversupply, coming mostly from producers tapping onshore shale formations, has pressured prices for the last two years.
For much of the winter, futures traded below $4.80/MMBtu--and often below $4/MMBtu--despite frigid temperatures that triggered steady draw-downs of what were record U.S. supplies in November.
Heating demand is expected to wane, however. Private forecasters Commodity Weather Group predict "a surge of warmth" for the gas-consuming Midwest and East Coast this week and next.
Without heating demand to push prices, look for broad economic data, such as numbers on retail sales and housing, to influence futures, analysts with Cameron Hanover wrote in a research note.
"At the same point, an improvement in the economy almost has to yield heavier demand for natural gas, when it arrives," the analysts said.
-By Ryan Dezember, Dow Jones Newswires; 713-547-9208; ryan.dezember@dowjones.com
-Matt Day in New York contributed to this article.
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